Knowledge

Have Questions about Disputing Chargebacks? Here’s What You Need to Know.

Merchants might have the right to dispute chargebacks, but knowing when and how to execute that right is confusing.

If you have questions about disputing chargebacks, we have the answers. Here’s everything you need to know to ensure success.

Why should merchants dispute chargebacks (those that were not a result of criminal fraud)?

With the counts of chargebacks climbing and liabilities increasing, these pesky processing issues are no longer just a cost of doing business. They are a hit straight to the bottom line, robbing profits and revenue, especially for ecommerce merchants.

According to the 2015 True Cost of Fraud study, card-not-present chargebacks continue to rise. This problem is exasperated with the side-effects of friendly fraud; friendly fraud chargebacks that go undetected can lead to another illegitimate chargeback filed within the next 90 days. Plain and simple: chargebacks are robbing revenues at an exponential rate, affecting much more than just processing liabilities.

What many merchants don’t realize, however, is that each chargeback carries with it an option for the merchant to defend themselves. Besides recovering revenues (an obvious and logical conclusion), merchants who effectively dispute illegitimate chargebacks also accomplish a bona fide prevention tactic as well.

As evidence of this claim, we can look to a recent Chargebacks911® case study. Chargebacks911® assisted 12 merchants through the use of our Tactical Chargeback Representment product. Results after 90 days yielded a 9.34% reduction in chargeback issuances. These results were achieved solely through the improvement of the merchant-issuer relationship with strategic, compliant chargeback disputes that proved the merchants’ innocence.

All that said, it is important to point out that not all representment tactics are the same. Certain strategies can actually do more harm than good. An overly aggressive approach or reliance on error-prone automation could increasechargeback rates. That’s why professional assistance is so valuable.

Merchants who dispute chargebacks with an in-house team are not only less effective when it comes to revenue recovery, they also run the risk of negatively impacting the merchant-issuer relationship. This can have severe, long-term repercussions for the merchant.

What is the average win rate merchants can expect when they dispute chargebacks?

It’s generally advertised throughout the industry that the average win rate is 21% or less. This win rate applies to in-house teams that have access to limited resources and experience. Their tactics are capable of addressing the low-hanging fruit—the easy-to-win chargeback disputes.

Chargebacks911® uses those same elementary tactics and then applies an additional layer of expertise. Our industry connections and patented technologies give us a considerable edge over the limited capabilities of an in-house team. Additionally, our myopic obsession with chargeback management means we are able to identify and implement cutting-edge, dynamic solutions to address threats before they become a liability.

Obviously, these advantages produce superior results.

However, there are elements more important than win rates to consider. For example, what are the long-term effects when the right strategy is used?

Ultimately, the best strategy is one that underscores prevention while working to recover lost revenues, reduce false positives, and work to improve the overall relationship between the merchant, cardholder, and the issuing bank.

Again, disputing chargebacks is a delicate task that requires professional oversight. Focusing too much on win rates and short-term success can negatively impact sustainability and longevity.

What are some tips you can share to help merchants dispute chargebacks?

Honestly, Chargebacks911 doesn’t recommend DIY chargeback reversals. There are several reasons why the effectiveness of in-house strategies is limited; to name a few:

The resources allocated to disputing chargebacks could be better spent acquiring new customers and satisfying existing ones.

There is just too much at stake. Certain types of representments can damage the merchant’s reputation with the issuing bank, thereby increasing future chargeback rates. If rates spike, the merchant’s processing agreement will be terminated. That has severe, long-lasting repercussions that jeopardize the business’s longevity. Plus, all that revenue is in danger of being lost forever.

Professional help is always an option—regardless of the merchant’s budget. Chargebacks911® offers everything from on-demand services to fully outsourced solutions and even revenue-share options.

Do you recommend merchants dispute all illegitimate chargebacks or strategically respond to those most likely to result in a reversal?

Each merchant’s situation is different; that’s why chargeback management needs a custom approach, not a one-size-fits all solution. So there isn’t a universal strategy for disputing chargebacks—especially when considering the differences between in-house teams and professional assistance.

Chargebacks911’s technology, Intelligent Source Detection™, works to identify the underlying source of the chargeback, helping to identify cases of friendly fraud. This enables us to definitively separate disputable friendly fraud.

Without access to this type of sophisticated tools, merchants run the risk of accidentally disputing legitimate criminal fraud. Disputing chargebacks when cardholders have been victimized could severely damage client retention rates and negatively impact the merchant-issuer relationship.

Therefore, in-house teams must exercise more caution and take a non-aggressive approach when disputing chargebacks. They may be best served by only disputing cases where the profits exceed the expenses, and then tracking their ratio of second disputes to make sure they sustain net returns.

What can merchants learn while disputing chargebacks to help create a more effective prevention strategy?

Merchants don’t want to hear this, but a surprisingly high number of chargebacks are caused by merchant error. Because “unauthorized transaction” is the most commonly used reason code, merchants assume their biggest threat is criminal fraud.

We’ve actually found merchant error results in far more chargebacks than criminal activity. For example, cardholders might use reason code 83 to file a chargeback because they don’t recognize the transaction on their statement and think it is fraud. In reality, the merchant’s billing descriptor didn’t easily identify the business. In these cases, merchant error—not criminal fraud—is to blame.

However, detecting merchant error isn’t easy. It’s hard for merchants to be objective about their involvement. Plus, wading through all the available information and determining which is relevant to effective chargeback management is challenging. For these reasons, most merchants find the task too time consuming and lack the expertise to technically address underlying issues.

Again, professional services can make the task of analyzing data much easier and more efficient. Not only that, but professionals are able to take that information and actually put it into practice.

For example, consider our Merchant Compliance Review. This product consists of a 106-point inspection of merchant practices and policies. We meticulously analyze all aspects of the business, carefully looking for potential chargeback triggers. We create an actionable plan for merchants to eliminate errors and reduce chargebacks.

Chargebacks911® Enables Merchants to Challenge with Confidence

Not only do merchants have the right to dispute chargebacks, it is also their responsibility. Each undisputed chargeback damages the merchant’s reputation a little bit more. Representment is the only way to stem the tide of illegitimate chargebacks once and for all.

But merchants should tackle this delicate task on their own. Let us help.

With Chargebacks911®, merchants can virtually eliminate all chargebacks that result from criminal fraud and merchant error. Once the preventable chargebacks have been prevented, Chargebacks911® helps merchants with the only task that’s left—effectively disputing illegitimate chargebacks. Our patented technologies identify friendly fraud and create compelling, compliant disputes.

With Chargebacks911®, you can challenge chargebacks with confidence, knowing our attention to detail and customer retention expertise will ensure long-term, sustainable growth.